Route Mobile Limited (ROUTE) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. My name is Yousuf, moderator for this conference. Welcome to the conference call of Route Mobile Limited arranged by Concept Investor Relations, to discuss its Q4 and FY '25 results. We have with us today Mr. Rajdip Kumar Gupta, Managing Director; Mr. Gautam Badalia, Chief Executive Officer; Mr. Raj Gill, Group Chief Financial Officer; and Mr. Vinay Binyala, Chief Strategy Officer. [Operator Instructions] Before we begin, I would like to remind you that some of the statement made in today's earnings call may be forward-looking in nature and may involve risks and uncertainties. Kindly refer to Slide #2 for the presentation for the detailed disclaimer. Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Badalia, Chief Executive Officer. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and hope all of you are doing fine. I'm pleased to report that Route Mobile has delivered exceptional performance this quarter, achieving industry-leading revenue growth of 15.5% year-on-year despite significant headwinds in the CPaaS sector. The communications industry is undergoing substantial structural changes, primarily driven by trust concerns around artificially generated traffic. These shifts have prompted enterprises and OTTs to explore alternate communication technologies and reconsider their go-to-market approaches. While these changes have presented challenges across the CPaaS ecosystem and eliminated weaker competitors, they create strategic opportunities for established globally diversified players like Route Mobile. As part of the Proximus Global umbrella, we are uniquely positioned to transform these market challenges into growth opportunities. I'll now spend a few developments -- I mean, some of the key developments in Q4 FY '25. So we launched a new AI-powered SMS spam and fraud protection solution under 365squared, which is called 365squared -- guard. We have been awarded as the Platinum winner for conversational commerce solutions innovation at the Telco Innovation Award 2025 by Juniper Research; honored with 2 prestigious Exchange4media awards for demand generation vendor user of the year and best use of martech in travel, hospitality and leisure. Regarding the -- we anticipate several advances in digital identity and telco APIs for the upcoming year, and we are confident in our ability to lead these trends. Given the global uncertainties surrounding traffic regimes that could substantially impact enterprise and OTT communication spending, we have decided against providing specific guidance for '25/'26 However, I want to assure all stakeholders that Route Mobile remains committed to outperforming industry growth rates, while implementing enhanced cost efficiencies to drive stronger profitability in this uncertain environment. In Q4 FY '25, we accelerated our synergy initiatives with the group. While our primary focus was on COGS, the cost of goods sold synergies, which temporarily diluted our direct margins or gross profit, we are confident in our ability to capitalize on high-margin cross-sell opportunities in FY '26. These strategic initiatives should significantly improve Route Mobile's direct margin profile moving forward. Our operating cost increased notably in FY '25 due to strategic integrations with Proximus Group, including investments in more robust systems and processes, onetime incentives, and competitive compensation packages to retain top talent. Looking ahead, we are implementing targeted efficiency measures, including AI-powered automation of internal processes, which will drive our cost optimization strategy. Regarding the exceptional item for an MNO contract, we have delivered over $100 million in annual value with strong ROI for Route Mobile even after accounting for the exceptional charge. This charge was triggered in Q4 when a major global technology company began phasing out one of their key platforms while shifting to alternate channels for authenticator and notification service. Despite not meeting our FY '25 guidance for revenue growth and EBITDA margin, we have excelled in free cash generation, achieving a remarkable 114% EBITDA-to-cash conversion. This success stems from enhanced working capital management and our strategic decision to pursue only such MNO deals, where we have compelling business cases and appropriate contractual protections. Our new product initiatives have continued to thrive, demonstrating impressive 38% year-on-year growth in FY '25. While WhatsApp business messaging margins were affected by Meta's pricing and incentives adjustments during the year, our product innovation remains strong. In the recognition of our solid performance, our Board has recommended a final dividend of INR 2 per share, bringing the full year dividend to INR 11 per share, which exceeds our guidance that we had rolled out previously. From a capital allocation standpoint, we'll continue to scout for bolt-on acquisitions to enhance the capabilities of the platform, and we shall continue to maintain our dividend payout ratio of 20% of the annualized PAT. I'll now hand over the call to Raj followed by Vinay, who will walk us through the key financial highlights and performance indicators. Over to you, Raj.

Thank you, Gautam, and good evening, everybody. I'll quickly summarize our financial performance during Q4 '25 and for the full year before handing over to Vinay. Starting with Q4. Our Q4 revenue from operations grew by 15.5% year-on-year, slightly declining 0.7% sequentially to INR 11,750 million. Gross profit margin was 19.3% as compared to 21.8% in Q4 last year and 21.1% in the previous quarter. EBITDA for Q4 decreased by 2.8% year-on-year and 6.1% sequentially to INR 1,219 million. EBITDA margin contracted from 12.3% in Q4 prior year and 11% in the previous quarter to 10.4% in the current quarter. Profit after tax was INR 850 million, which is down 8.9% year-on-year, and PAT margin declined from 9.2% in the previous year to 7.2% in Q4, which is in line with the previous quarter. Now turning to the full year. Revenue from operations grew 13.7% from INR 40,233 million in the previous year to INR 45,756 million in FY '25. Gross profit margin decreased to 20.8% in FY '25 versus 21.4% in previous year. EBITDA grew by 3.3% to INR 5,278 million in FY '25, with EBITDA margin at 11.5% versus 12.7% in the prior year. Profit after tax, adjusted for exceptional items is lower by 5.3% year-on-year to INR 3,524 million with a PAT margin of 7.7%. Cash and cash equivalents stood at INR 13,327 million, and net cash was INR 8,918 million as at March 31, which are both significantly higher than the prior year. Days sales outstanding average over the year was 80 days, in line with the previous year. However, as at March 31, DSO was 74 compared to 97 in the same period last year, with DPO at 68 days compared to 66 in the prior year, all contributing to a very strong cash flow conversion of 114% in FY '25. I will now hand over to Vinay, who will provide some more color to our operational performance.

Thank you, Raj. Good evening, everyone. Adding to the update shared by Gautam and the financial highlights presented by Raj, I will run through the key business performance indicators for Q4 FY '25 and full year FY '25. Despite the material shifts and headwinds in the CPaaS market as referenced by Gautam, we have successfully delivered industry-leading Y-o-Y revenue growth of 13.7% in the year FY '25. Revenue from operations, as Raj highlighted, grew from INR 40,233 million in FY '24 to INR 45,756 million in FY '25. In addition, we have delivered 38% growth in new product revenues in FY '25, which reflects our platform's expanded capability in terms of addressing communication requirements of enterprises across various channels, not only in A2P SMS but across IP-based messaging such as WhatsApp, RCS, et cetera, and e-mail. To discuss some of the key business metrics, in volume terms, we processed 156 billion billable transactions in FY '25. We processed 39.3 billion billable transactions in Q4 FY '25 versus 38.9 billion in Q3 FY '25 and 34 billion in Q4 FY '24. Average realization per billable transaction marginally decreased from INR 0.319 in FY '24 to INR 0.294 in FY '25, primarily due to the change in traffic mix. In FY '25, we reported net revenue retention of 107%, with 90% recurring revenue. You may refer Slide 11 of the earnings presentation for details. In terms of geography mix, India continues to be our largest market by termination, accounting for 50% of our revenue by termination. Slide 9 presents additional details on other geographies. Revenue contribution from Tier 1 CPaaS partners increased from 10% of total revenue in FY '24 to 19% of total revenue in FY '25, primarily from low-margin COGS synergies resulting from related party transactions. Slide 9 presents our contribution from other verticals in the investor presentation. In terms of human resources, we onboarded 53 new professionals, and 29 employees decided to move on during the quarter gone by. This is a quick summary of the quarter and year gone by. Thank you. And with that, we can open the floor for Q&A.

[Operator Instructions] First question is from the line of Jyoti Singh from Arihant Capital Markets Limited.

Sir, just wanted to ask, like this year, we are not able to make the guidance. So what are further stance on that and what the guidance we wanted to give to shareholders and investors? And apart from this volume side, we have seen growth in India in this quarter. But overall, if we see overseas and other region, still, we are in degrowth, so if you can guide.

Sure. Thanks, Jyoti. So I'll take the first -- second question first. So I think you're right. I think in the domestic volumes in India, I think you've seen a significant ramp-up. We witnessed a little bit of a challenge in terms of the ILD volumes, largely, as I said, I think, during the commentary as well, I think some of the customers -- I mean, one of the large technology customers, they've phased out one of their core platform, and then they also kind of moved to alternate channels, right? So that led to a little bit of an impact in terms of the ILD volumes. And from a rest of the world standpoint, the volumes have been flattish, so to say, on a quarter-on-quarter basis. Coming to the guidance, I think, considering a lot of uncertainties around, we decided, I mean -- and last year, I think, was kind of a miss from a revenue and EBITDA margin guidance standpoint. So I think we wanted to kind of, first, I mean, focus on some of the integration efforts that we are doing with Proximus and then see to it, I mean, that the cross-sell synergies start to fructify before we really call out, I mean, some of the numbers, I mean, from a forward-looking standpoint. But as highlighted, I think, during the commentary as well, we'll continue to kind of focus on driving industry-leading growth and also work towards some of the cost efficiencies so that we can drive that growth with some operating leverage as well.

Okay. Sir, just wanted to understand how the integration is going on with this Proximus. And also, channel shift is going on overall industry, so if you can guide us when we are seeing the better visibility in this sector.

No, so you're absolutely right. So the integration efforts with Proximus, I think, is going in full swing. And I think last year, what we were able to tap into was largely the cost of goods synergy, I mean, which essentially is the low-hanging fruit. We were able to identify routes, which are beneficial and thereby having gone with the traffic from the group, right? So that, I think, was the easier of the lot. I think we have done adequate enough and more training within the group now on cross-pollinating each of those products, which we can then kind of tap into our respective customers. So we are very, very optimistic that I think we will start to kind of the ring the right bells, I mean, from a cross-selling standpoint in this financial year. And that will really kind of drive some margin -- direct margin kind of improvement for the year. In terms of some of the structural changes that have been -- that is happening, I think, across the industry right now and which more than the industry is trying to grapple with, the good thing is, I think, the weaker -- I mean, it's leading to the weeding out of a lot of weaker players, so to say. And today, most of the large global enterprises prefer working with large established players, where they can kind of have high reliability and credibility in their relationship. And that's where I think, as Proximus Global, as Route Mobile, we stand a fair chance. I mean in the past, I think we have won a few large deals. Unfortunately, I mean, some of them were not kind of contributing meaningfully during the year gone by, but some of those strategic partnerships, that we have won, I mean, in FY '26, you will see some meaningful kind of contribution from some of those strategic partnership deals that we have won. So -- and just the last point on that, I think the world will also gradually kind of move from -- I mean this AIT is a big, big kind of a nuisance value in the industry and which has really caused a lot of trust issues with large enterprise. I mean, the largest e-commerce companies of the world, they have called it out explicitly in some of their statements as well. So I think we'll have to kind of graduate to some of the more advanced technologies like networks APIs. We are already working on the telco API stack. So some of these investments into the futuristic technologies, I think, will be very important. And as we speak, I think we are testing some of these things with some of the large enterprises. If -- I mean, once we are able to garner some success on that, we can really have a first-mover advantage on that.

Next question is from the line of Swapnil Potdukhe from JM Financial Limited.

Gautam, I would like to understand what kind of revenue contribution currently we have from TeleSign or broadly speaking, cross-sell revenues from Proximus.

So for the quarter gone by, Swapnil -- for the quarter gone by, the revenue contribution from TeleSign was close to 14%.

Okay. And any incremental cost savings from Proximus? Or like we are still yet to get...

No. So not really. I mean, it was largely -- I mean, the synergies that we've been able to kind of tap into right now, largely, I mean, is around the cost of goods sold. Some of the cross-sell initiatives, we've seen some good progress in terms of pitch to clients, in terms of some advanced level of discussions, but nothing is fructified in terms of numbers yet.

Yes. Gautam, just to add. Swapnil, Rajdip here. I think you need to also understand there are certain discussions, which we are now -- let's talk about BICS as a part of Proximus Global. So Route Mobile and BICS, I think, jointly working on certain solutions, especially on the 365guard and our firewall solution, being BICS has more reach, especially in the operator ecosystem. And we are definitely going to leverage on that relationship, what BICS has, and I think we are already in discussion with multiple operators about our fiber solution as well as the new spam filter, which we have built. Apart from that, I think the world is moving towards RCS also, and we are definitely looking out a platform play in this. And since we have deployed our RCS platform with Robi Axiata, which is live last 1 year, and we would love to take this entire stack to the operators all across the globe where BICS has a huge presence. And I think that is exactly where we are looking out this RCS platform play a big way. We are already in talks with multiple operators for this solution. And we believe in this particular year, we will have a few good operators who are going to be onboarded with our RCS platform as well and plus spam filter.

Got it, Rajdip. And in the opening remarks, there was a mention of some impact of -- on the gross margin because of a related party business and presuming this is TeleSign. Now yes -- so I just wanted to get a sense as to what kind of gross margins are we getting in the TeleSign business and [ net of ] TeleSign currently.

Yes. So I think -- Swapnil, I think we've kind of highlighted in the past, I think, it should blend around our EBIT margin levels. But considering, I mean, some of the cross-sell synergies didn't fructify, so effectively, I mean, the dilution was a little more than the EBIT margin.

But as revenue from our related parties increase going forward, how should we think about your gross margins? So is 19% the new norm? Yes.

Yes. So -- yes, let me just answer first part, then maybe you can add second part. So I think, Swapnil, you need to understand the 2 parts, which is a pure messaging piece, then the platform play. So when we talk about the platform play, whether it is 365 spam filter or RCS platform or a CPaaS-in-a-box solution with operator, we are looking definitely high-margin game over there. And that is the one play, which we would love to play along with BICS for the long term. And I think we believe in coming future, these margins are definitely going to be much higher than [indiscernible] margins. Gautam, over to you.

Yes. So Swapnil, just to answer your point -- your query, so I mean, right now, what we have been able to tap into is largely the cost of goods sold synergy, right, and which -- from a maturity standpoint, I think we've kind of fully kind of reached, I mean, nearly -- I mean, the maximum, I think that we could have reached. I mean, we'll still be discounting for more there, but I think we believe, at this point in time, I think we are nearly there in terms of that. So I think that's on the -- as I said, I mean, these are relatively at a lower margin levels. And then as Rajdip alluded, that most of the other cross-sell synergies that we're talking about are at a significantly higher margins. So going forward, we shouldn't see the direct margins to kind of get further diluted. And in fact, we believe, I mean, it should meaningfully improve from here and should steady around, I mean, our last few quarters' historical levels.

Is that a short-term guidance or a medium-term guidance? I mean I'm just trying to understand, like will there be a few quarters where we'll be in this current range and gradually, there will be an improvement or you are suggesting that 1Q FY '26 onwards itself, we will have a recovery on gross margins.

As the cross-sell synergies starts to ramp up, Swapnil, you will see that improvement coming through. So I mean, whenever we start to kind of start hitting those cross-sell numbers, I think, you will see meaningful improvement coming through. We anticipate, I think in the next few quarters, we'll definitely see meaningful improvement there.

Got it. And so there's another question with respect to the write-off that you had in one of the MNOs. Now just wanted to get a clarification. Is this related to Vodafone first? And secondly, can you explain why you had to take a write-off on the receivable side? And what were the circumstances? Because there is also mention of nonfulfillment of short-term contracts. I mean, there are multiple things mentioned there, but a bit of clarity would be appreciated on this.

Yes. So I mean, I'll not call out the name of the party, I mean, due to the confidentiality kind of aspects. But I think we've generated more than $100 million of value -- annual value to that MNO. I mean, we had a slightly -- so about a INR 28 crore higher target than what we've kind of delivered, and that largely, that INR 28 crores was -- I mean, that shortfall was, I mean, largely around a technology company -- I mean, a large global technology company kind of, first of all phasing out one of their platform. And then the second thing was essentially on -- I mean, they're moving to some of the alternate channels for communications. So that led to a tad bit of an impact on the ILD volumes for Q4, which had an impact in terms of the overall commitment that we had with the MNO. So we had to -- I mean, so essentially that gap was kind of captured as part of an exceptional charge to the P&L. But notwithstanding that charge, I mean, even if we adjust for that charge, I think from an ROI standpoint, we would have generated more than mid-teen -- close to mid-teen kind of -- I mean, close to $15-odd million plus kind of ROI on that deal.

But Gautam, as I understand, I mean, this will be airtight contracts, I would presume, that you would have with the MNO. Does that -- I mean, it still does not answer like how -- why exactly would any established MNO would want to not pay you according to the terms of the contract.

No, no, no, it is -- so we had an annual commitment with that MNO, right, and by virtue of which we have an exclusivity on the network. So we were able to deliver, as I said, over $100 million. We were short by about INR 28 crores there. So as part of the contract, that INR 28 crores was kind of an impact that we had to take on our P&L. But as I said, I think from an ROI standpoint, we've generated -- I mean, we definitely would have loved to kind of fulfill the commitment had this ILD impact not kind of fructified in Q4, which unfortunately was kind of out of our control. But having said that, I think, overall, I mean, as part of this deal, I think we have made decent ROI for the business.

Okay. And just a last one on your balance sheet side. We have seen our borrowings almost double from around INR 200 crores to INR 250 crores -- INR 450 crores. Now any particular -- since we are also generating a decent FCFF, why exactly are our borrowings rising and thereto in a meaningful manner even if it is a, let's say, working capital-related borrowing? But still, that quantum seems to be quite huge now.

No. So Swapnil, I mean, this was taken kind of only for a 6-month period, I mean, essentially, again, at the backdrop of a contract, where we had to kind of make the payment to a supplier. And it would have entailed a lot of cash pooling. I mean, so we've kind of created a security in India and then through some treasury -- I mean, so we have some positive carry, I mean, in terms of the cash deposits that we have. So from that perspective, I mean, this loan will get retired, I think, in the next 2, 3 months' time. So -- I mean, per se, as you rightly said, we have close to, I mean, over INR 850 crores of cash, net cash on the books. So I mean, some of these loans, I think will be retiring, I think, over the next few months.

Next question is from the line of Dipesh from Emkay Global.

A couple of questions, first, about the synergy benefit you indicated. How do you expect this platform-led synergy to play out? My understanding, you indicated about messaging synergy largely played out. Platform is which yet to play out. So if you can provide some context, how you expect it to scale up. And what are the markers, let's say, which you try to track in terms of whether progress is up to the mark or not? That is question one. Question 2 is about the cash balance. What would be your net cash balance at the end of FY '25? And let's say, when we are generating very healthy cash flow, why we still stick to 20 percentage kind of payout? So if you can just give some thought process about how you intend to utilize case, what we are generating and what is there on the balance sheet apart from M&A and M&A, which would be the focus area, let's say, where we intend to invest in the business?

Yes. Rajdip, you want to take the platform, cross-sell platform?

Yes, yes. The -- Dipesh, I think it's a very good question. In fact, there are many firewall deals, which we are working with BICS right now. And BICS is front ending some of these deals, especially in Africa and Latin America, Southern market. And we believe these deals to be closed very soon, and there are certain deals, which we are going to announce very soon as well. In terms of a platform play, especially on the RCS platform, which is definitely a big need for many operators globally -- and most of the operators are looking forward to have this platform and our relationship with operators because of BICS is now, I think, the largest as compared to any CPaaS player in this world right now. And probably we are leveraging each and every single contract touch points of BICS. In fact, we are doing lots of workshop with operators, which we have started from last 3 months. And these workshops are playing really well in our favor because then we go and meet the operator. We're not just talking about BICS solution, but we talk about Route Mobile solution, especially the CPaaS piece, which we have and the firewall piece which we have. So I think jointly, we have got a very good feedback from operator, and I think we are definitely going to have multiple workshops with Asian operator also, where RCS is still at very early stage, apart from India, if you see. And the kind of connects we have in the Asian market and African market through BICS, I think these things are already in talk, and we probably have few decent discussion, which we will announce very soon. Yes, Gautam?

Yes. Dipesh, on the cash bit, I think -- I mean, we have continued to maintain kind of the guidance and of rolling out 20% of the annualized PAT. Besides that, I think we'll also kind of look at some -- other revenues by which, I mean, we can kind of also look at returning any excess cash to the shareholders through some corporate actions. Besides that, I think, as we speak, I mean, we are working on a few small bolt-in -- bolt-on kind of opportunities, which can really help us kind of have, I mean, greater capabilities in terms of the platform. I mean, it could be things around CCaaS powered by AI. Some of those areas, I think, we are really kind of looking at a few opportunities at this point in time. Yes, Dipesh...

Yes. One more point, Dipesh, just to add. I think travel SIM is a big market right now. And we, as a group, have a brilliant solution through BICS travel SIM, and I think we would love to lead this travel SIM solution for the operators, especially where Route Mobile has a good connect right now. In fact, we have reached out to few of operators in our part of the world, and I think they have shown a great interest in our travel SIM solution also.

Understand. Just wanted to follow up on the BICS-related firewall, whether the margin profile of that would be like what we make in related party transaction or it would be organic growth kind of margin profile because if it is, let's say...

No, no. Dipesh, I've already shared that, the margin on the platform play and the firewall is much, much higher than the messaging side of the business.

So that, we will return, right? It would not be the...

Yes, yes. So Dipesh, we will have the software margins there.

Sorry? Okay. So we will have higher margin in that side. And I think on the -- I think you provided net cash at the end of fiscal '25. If you can give that number, what was the number?

Net cash was INR 8,918 million.

Yes. So that is fairly -- let's say, INR 800-odd crore is fairly large number. And considering our CapEx requirement is fairly low annually, do you think this kind of cash balance is what we intend to retain and accrue over a period of time because 20% at payout seems to be very low considering the kind of case we generated in fiscal '25?

So it's a fair kind of an observation, Dipesh. I think we are in the midst of a review. I mean, some are review, I mean, at the group level. And as I said, I mean, some of the excess that we have, we'll definitely want to return it back to the shareholders through, I mean, certain corporate actions. So we'll come back to you at an opportune time. But as I mentioned, I think some of these things are at a drawing board right now, and we'll come back once we have something more concrete.

Sure. And last question on -- related to platform versus messaging. Let's say, you indicated related party transaction is roughly 14 percentage of revenue in quarter 4. Considering, I presume right now, platform play is practically insignificant, if one would want to look at 3 years out, what kind of mix do you expect between messaging and platform play in our related party revenue mix?

So Dipesh, I think the platform play, as I said, like it's a long sales cycle. And definitely, we don't want to give any guidance on that. But I can just assure to the investors, that we are definitely going towards a very different kind of a direct margin game right now with BICS right now. Gautam, if you want to add anything to this.

No, fairly put. And Dipesh, at this point in time, we don't want to call that out, but I mean, we'd want some successes to kind of come through and then kind of give some contextual guidance on that.

Next question is from the line of Prasad Padala from SBI Mutual Fund.

Am I audible?

Yes, you are audible.

So Gautam, if I look at your EBITDA margin, so from last quarter, Q4 FY '24, it was almost like 12.3%. So this quarter, it has fallen almost like 200 bps from there. So one, I understand maybe, I mean, at a gross profit level, you might have a lower gross profit for the related party messages. But at an EBITDA level, conceptually, there should not be any GAAP right? So if you can actually clarify, first, what is the impact because of the related party messages, so that would be helpful.

Yes, yes, Prasad. So essentially, what has actually transpired at the operating overhead level, I think, we'll be able to kind of capture some efficiency. So there was some benefit, I think, that we were able to kind of drive vis-a-vis Q3. But I think the weakness that you see in EBITDA margin largely is flowing from the DM impact, which is, to a large extent, contributed because of -- I mean, as I said, the lower margin COGS synergies with the group.

So I mean I don't understand because, let's see, even if you assume 0% margin from those related party messages, right, because 14%, let's say, even if we take 0%, the impact maximum should be 140 bps. So there is an impact outside of that also, right? And I mean, for example, I see that your employee expenses have gone up by 17%, while your gross profit is almost flattish.

No, you're talking about the full year, Prasad? You're talking only for the quarter?

No, I'm just talking about -- I'm talking about only quarter. So I think maybe it will be helpful if you can actually clarify on the related party absolute margins on gross margins and EBITDA margins. I think that would be very helpful for the investors.

Yes, sure, Prasad. So I think what I see on the numbers, right, on the operating overheads vis-a-vis the previous quarter, there is a drop, right, in absolute numbers. I think what's kind of impacting the EBITDA is largely flowing from DM, and that's largely, to a large extent, attributable to the related party transactions, which, today, I mean, for all practical purposes and the cost of goods sold synergies, I mean, essentially, the route optimization that we've been able to provide to the group, that's happening at arm's length, which has been kind of approved by 1 of the big 4. And as I said, I mean, it's a tad lesser than the EBIT margin for the company, so -- which is what is causing the impact.

Got it. Okay. I mean, if it is just a tad lesser, I'm just wondering why there is a 200 bps drop in the EBITDA margin year-on-year. That's the only question I'm asking.

Year-on-year, -- you're talking about it year-on-year, Q-o-Q?

No, year-on-year I'm talking...

Year-on-year, you're right. Okay. Okay. Okay. So now I get the context. So year-on-year, if you were to look at the numbers, I think the cost base for the company has increased, I mean, from what it was a year back, and there has been a significant increase in the cost base. And Prasad, I mean, that's what I wanted to call out in the commentary as well. I think as a management team, we are committed to optimize a lot of those costs. I mean, some of these cost base recalibration happened during the course of last year, owing to, I mean, the closure of the M&A deal and then the integration efforts and stuff. So some of them were kind of front loaded. As we speak right now, I think the management -- and that's also been a guidance by the Board, to work on cost optimization. And as a management team, I mean, we are committed to drive some of those initiatives by kind of focusing on automations powered by AI in the ecosystem and also focusing on kind of removing the redundant layer within the company.

Next question is from the line of Pritesh Chheda from Lucky Investments. As there is no response from the current questioner, we will move to next question from the line of Anmol Mittal from SMC Private Wealth.

As you quoted, there are few large deals are there...

Sorry, Mr. Mittal, your voice is not clear.

As you quoted, there are few large deals are there, which will contribute in the sales of the company in coming future. So what is the margin from there we can expect? And the second question is there, as you mentioned, about the 360guard (sic) [ 365guard ], the new digital platform, and there are many initiatives, which the company has taken until now regarding spam and fraud control solution. So as this segment looks very lucrative from the initial view, what is the expected amount of contribution in sales and profit come from there in future? It is a superior margin business for us? Am I audible?

Yes, you are. I think we missed the flow. Can you please kind of reiterate your queries?

Sure, sir, I can...

No, no, I got this. I think it is Anmol, right? I think I got all your question. I've already mentioned that there are lots of synergies and there are lots of discussion going on right now with the various operators and enterprise along with BICS. And we are in very early stage to give any kind of guidance, but we are very much sure that the guidance -- the direct margin is going to be much, much higher than what we make on messaging right now. That's the only thing I can share with you right now.

And what about the fraud and spam control solutions platform basis?

So I think it's a great thing to have this solution in built in-house, and we, as a company, have deployed the solution with the operator in Asia. And we do see this is a very basic requirement is going to be with multiple operators because of the kind of digital fraud happening all across the globe. And we do see this as a great opportunity, where operators are definitely looking out to deploy these kind of solutions. And I think probably we will give more clarity in our next earnings call that -- how the things will -- moving out right now.

Next question is from the line of [ Nirmam ] from Unique PMS.

My question is on the balance sheet. So we have a few advances and deposits given to suppliers. So by when do we expect these to be adjusted or flowing to the cash flows?

Yes. So the deposits would flow into the cash flow. I mean, within the -- I mean, over the next few months, so that, I think, will get kind of unwound during the course of the next few months. In terms of the advances that we have with certain telcos, again, I mean, these are kind of renewed on a 6 monthly basis with some of them. So I mean, they are mostly, I mean, short term in nature. And I think for one of the telcos, we -- as I think I mentioned in the notes, we have also a legal dispute, right? I mean, that's now kind of gone into an arbitration. So I mean, we will share more light on that, I mean, as and when we have more color on that arbitration proceedings.

Okay. But then we do expect these to start getting cleared by this financial year.

Yes. That's correct. That's correct.

Next question is from the line of [ Jimet ] from Emkay Global. As there is no response from the current questioner, we will move to the next question from the line of Dipesh from Emkay Global.

Just wanted to get quarter 4 EBITDA margin on non-GAAP basis because it appears that has corrected more than what it appears on reported basis. If you can say that number. 9 months, it was 12 percentage. If I look full year, it is 11.5%. So can you say what is the number for quarter 4?

Sure. Well, give me a second, Dipesh. Dipesh, it would be around, I guess, 10%. I can reconfirm that off-line.

Yes. So there is a sizable decline. If I look, let's say, adjusted margin because that is one better way to look at it, how margin is tracking. Can you help us reconcile that fall?

Yes, yes, we will -- we can take this up off-line, but largely, Dipesh, it's flowing from the DM impact.

Next question is from the line of [ Siddharth S ] from [ Vitai ].

Recently, I guess, around a month ago, you said you were going to launch this 365squared app, which is powered by AI. And one main thing which I wanted to look into this was as Route as a whole is backed by Proximus Global, which is a global CPaaS company, so I just wanted to understand that you're facing the current industry patterns as such. Will Proximus be any -- will it be any way to back up Route assets? And what kind of potential revenue contribution can this 365squared platform bring to the top line of Route Limited.

[ Siddharth ] [indiscernible] -- yes, Gautam, go ahead.

Yes, Rajdip, go ahead. Go ahead.

[ Siddharth ], as I already mentioned, like some of the in-house product, which we have built, especially -- and plus the RCS platform, which we have built by Route Mobile, with the help of Proximus Global, is already helping Route Mobile to take us to the various operator globally, where this has a direct reach. I think that is the biggest advantage we have as a CPaaS player right now as compared to any other CPaaS player in the market, where we have advantage of being this as a part of Proximus Global. And I think jointly, we are working on strategy. And as I said, we are having multiple workshop with the operators, which we have started a few months back. And every single month, we are going to have 1 or 2 workshops with operators, where we are going -- not going to talk only the Route Mobile messaging solution, but apart from, there is 365 and the BICS solution as a combined solution offering. In terms of revenue potential, I can just tell you it's a -- completely a platform play, and you can understand the kind of margin we can generate from the platform play. Gautam, if you want to add anything to this?

Got it. So -- and the other thing would be that the current industry backlashes that you are facing, so -- and I totally understand that when industry was doing when you are performing on a good scale. What would you give us an outlook on the industry going forward and how it will exactly correlate with Route Limited assets in terms of some guidance if that would be possible.

So as far as the company is concerned like -- so even there is a shift happening from, say, messaging to other OTT channels. We, as a company, are fairly well placed in that ecosystem as well. We are a premium partner with Meta. We do have lots of solutions. If you see our overall growth in the omnichannel space, I think we grew almost by 35% year-on-year basis, I think, if you see that number. And we are still onboarding lots of banks, lots of enterprises on these channels, especially RCS and WhatsApp, and plus the e-mail solution, which we have. With this cross-sell and upsell opportunity, which we bring together as one group, including TeleSign and BICS, I think now we have access of multiple customers, which are in our captive customers all across the globe. And I think if we now have a full story and full idea that -- what to sell and how to sell and which customer to sell, I think probably you will see all these synergies out in our numbers in this particular year.

Okay. Got it. I mean, it looks very impressive on the track record that you mentioned with respect to the company. What would you give an outlook with respect to the industry assets, sir?

So as far as the industry asset is concerned, if you see, Route Mobile's performance is definitely industry-leading numbers like given -- in terms of growth. In spite of having so many headwinds in the market, we are still performing better as compared to some of the competition if you see right now. So I think I can only tell you that some of the synergies, which we are working right now with -- as a group, I think we do see a great potential in coming quarters. That's the only thing I can share with you right now.

Got it, sir. And just a small clarification with the first question that I asked. The 365squared, that would be a potentially high-margin player, right, sir?

Yes, indeed. Yes, indeed.

Next question is from the line of Amit Agicha from HG Hawa.

Am I audible?

Yes, we can hear you.

Sir, my question is like from bird's eye view, if you've seen from last 10 years, the sales in March '16 were INR 367 crores, and now they are INR 4,576 crores, so something like 12x, you can see, but the profit has jumped from INR 63 crores to INR 334 crores, which is not even 6x. So can you just guide us like what is reducing the profit because the expenses have been not been controlled. And plus, another question was connected to the cash which the company is having. The balance sheet shows like big cash is available, and plus, still the loan is also available there. That's my question, sir.

Sure. Sure. So I think on the cash bit, I think we called it out right. I think we are in the midst of kind of our summer review. And I think we'll come back. We're looking at a few bolt-on acquisition opportunities. We called out a 20% kind of annualized PAT dividend payout. And besides that, I think any excesses that we believe we have, I mean, we'll definitely look at returning back to the shareholders. In terms of the business, I think you're referring to -- so from what period to what period you mentioned, sorry, if you can just repeat that.

2016 to 2025, 10 years.

Yes, 2016, the base of the business was very small at that point in time. The ILD business was priced at, I mean, less than $0.01, right? And then we were making like 30%, 40% kind of direct margins. So as the prices in the ILD ecosystem started to increase and that increased from INR 0.10 to -- and it has today, I mean, rose to $0.04 to $0.05. So I mean, in absolute terms, we are making definitely a lot more. But I think what has happened is in terms of the percentage margin, it has kind of led to significant dilution. And hence, I mean, what you see as the revenue ramp-up, I mean, doesn't necessarily kind of fructify into your EBITDA margin expansion.

Sir, what are the company's internal growth targets for EBITDA margin for the coming year?

So as we mentioned, I mean, at this point in time, I mean, considering some of the integration efforts and the global uncertainties, we are not calling out a number there. But I think we would definitely want to kind of do better than the industry, both in terms of revenue and drive more cost efficiencies within the company to drive better profitability.

Sir, the last question, can you please help me out with what is the employee [ strength ] or the head count current?

841 employees as of March end.

Next question is from the line of Amit Chandra from HDFC Securities.

So my question is a follow-up in terms of the impact that you have seen on the gross margin. So as you said, we have 14% contribution from related party volumes, which had the impact, but the math is not matching. But in terms of the volume from the third parties or related party volumes, has it peaked at 14%? Or we see that like increasing more from here? Why I'm asking this is that because if it increases more from here, then can we see further impact on the gross margin because you have said that the gross margin is expected to improve from here. So what [indiscernible] helped that? Yes.

Yes. Sure, sure, Amit. I think -- yes. So I think we are more or less, I think, close to the peak in terms of the low-margin cost of goods synergies. And then this was easier to crack, I mean, considering, I mean, it was just a Route optimization, so we have been able to tap into that in a big way during the year gone by. Now I mean if you were to just kind of slice the direct margin or gross margin between related party and all the other third parties, so if you adjust the related party gross margin, we have seen marginal improvement in the gross margin metric vis-a-vis the previous quarter, right? So I mean, a large part of that was largely because of the [indiscernible] pricing with the related party, which was causing the dilution.

Okay. You've seen some impact -- all the impact that we have seen on gross margins in this quarter is because of the higher related party volumes. There is another part of the business. The margins have improved basically.

Yes, Amit, you're right.

So Amit, for the quarter, I mean there could be a marginal dilution here and there. But on an average, I think it is steady. I think the large impact is because of the related party.

Okay. Fine. And the second question is you said that we have done $100 million kind of revenue for the large -- for the Vi deal. So this $100 million is obviously for the full year, and still, we have missed around 2.5 million, which you have like maybe provisions for. So for the next year, the target remains the same or it's a moving target? And how -- so here also because our previous understanding was that the minimum revenue commitment was much lower from the $100 million mark, then also like despite doing $100 million, we have to pay -- or we have to make a provision of INR 25 crores. So that is not -- like we're not able to understand that.

So Amit, I think what actually transpired was, I mean, things that transpired towards the end of the quarter. I mean, other than that, I think we were running at kind of a good average to kind of meet the committed obligation last year. Now for the next year, I think considering, I mean, some of these global uncertainties and all, we've had detailed negotiations, discussions. And I think that the commitment amounts have significantly reduced. And contractually, there are now safety nets into the agreement that if the headwinds were to kind of go beyond a certain -- or get impacted beyond a certain threshold, there are kind of levers in the contract, which can kind of lead to a lower commitment amount from our perspective. So I think from a FY '25, '26 commitment standpoint, I think we have enough cushion in terms of the obligation that we have, and we've kind of baked in the risk of some of the uncertainties that we could kind of envisage at this point in time. And besides that, as I said, I mean, there are safety nets into the contract, which allows us to downward revise the commitment if things were to go, I mean, bad beyond a certain threshold.

Okay. And lastly, if you can give some number around what percentage of our volumes and revenue is from ILD basically or the international messaging, if you can give that for the full year.

Sorry, sorry, what is that?

ILD volumes and revenue contribution for the full year.

So Amit, we don't call it out categorically. I mean, India happens to be 50% of the revenue and as a rule of thumb, about 2/3 of the revenue comes from ILD. I mean, we can just give you kind of a ballpark sense on this.

Ladies and gentlemen, we will take this as a last question for the day. I would now like to hand the conference over to Mr. Raj Gill, Group Chief Financial Officer, for the closing comments.

Yes. Thank you, everybody, for your attention. And with that, we will close the call, and I wish you all a good end to today, and see you next quarter. Thank you.

Thank you, sir. On behalf of Route Mobile Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.